Numerous prior studies on corporate diversification in the past two decades have attempted to answer the following related questions: (1) Does diversification destroy or create value? (2) If corporate diversification destroys value, then what are the underlying reasons and why are there many diversified firms? (3) If corporate diversification creates value, then what are the underlying reasons? In answering the first question, empirical studies have been employed the excess value approach, the Tobin's q approach, and the abnormal returns approach. Results, however, are inconclusive, i.e., diversification has been found to be value-destroying in some studies, and value-creating in other studies. In answering the second and the third questions, studies usually have relied on agency theory. Conclusions, however, are contradictory. Some studies claim that diversified firms have severe asymmetric information problems while other studies claim that diversification actually lessens asymmetric information problems.